Her Majesty the Queen v. W. D. Armstrong & Co. Ltd., [1970] CTC 175, 70 DTC 6148

WALSH, J.:—This is an action to demand payment from defendant under the provisions of Sections 30 and 31 of the Excise Tax Act and Section 10 of the Old Age Security Act of the amount of $5,324.11 in respect of certain matrices produced or manufactured in Canada for defendant’s own use and not for sale during the period between October 1, 1963 and July 11, 1966. In addition the penalties prescribed by subsection (4) of Section 48 of the Excise Tax Act are claimed. The significance of the date July 11, 1966 is that this was the date when the Act 14-15 Eliz. II, ce. 40, making certain amendments to the Excise Tax Act and in particular replacing Schedule III thereto received Royal Assent. It is therefore the provisions of the Excise Tax Act as it existed during the period in question which we must consider.

Defendant. denies that the matrices in question are subject to tax but admits that if they were the amount of tax claimed would be correct. Defendant’s various alternative arguments are as follows:

1. That the matrices in question were not manufactured or produced “for use’’ by the defendant within the meaning of Section 31(1) (d) of the Excise Tax Act.

2. That they are not “goods” within the meaning of Section 30 of the said Act.

3. That if they are subject to tax on the interpretation of the provisions of Sections 30 and 31 of the Excise Tax Act they are nevertheless exempt by virtue of the provisions of Section 32 on the grounds that they constitute materials . . . consumed or expended directly in the process of manufacture or production of goods’’, to wit, in the manufacture of rubber stamps within the meaning of Schedule III to the Act.

4. That the matrices in question are not subject to tax since they are used for the purposes of manufacturing a taxable article of goods, to wit, the said rubber stamps, and the imposition of tax in connection with the manufacture or production of them would constitute double taxation.

5. The tax would not be a ‘‘consumption or sales tax” within the meaning of the Excise Tax Act.

Seetion 31(1) (d) of the Excise Tax Act* [1] reads as follows:

31. (1) Whenever goods are manufactured or produced in Canada under such circumstances or conditions as render it difficult to determine the value thereof for the consumption or sales tax because

(d) such goods are for use by the manufacturer or producer and not for sale;

the Minister may determine the value for the tax under this Act and all such transactions shall for the purposes of this Act be regarded as sales.

Section 32(1) reads:

32. (1) The tax imposed by section 30 does not apply to the sale or importation of the articles mentioned in Schedule III.

The relevant portions of Schedule III as it read prior to July 11, 1966 had a paragraph under the heading Printing and Educational” reading as follows:

Typesetting and composition, metal plates, cylinders, matrices, film, art work, designs, photographs, rubber material, plastic material and paper material, when impressed with or displaying or carrying an image for reproduction by printing, made or imported by or sold to a manufacturer or producer for use exclusively in the manufacture or production of printed matter;

Under another heading “Processing Materials’’ it included :

Materials (not including grease, lubricating oils or fuel for use in internal combustion engines) consumed or expended directly in the process of manufacture or production of goods.

Schedule III following the 1966 amendment contained a section (Part XIII) headed ‘‘Production Equipment and Processing Materials’’ in which Section 3 reads exactly the same as the paragraph quoted from the heading ‘‘Printing and Educational” in the old Schedule III and Section 2 reads exactly the same as the paragraph quoted which appeared under the heading ‘‘Processing Materials’’ in the old Schedule III. Section 1, however, reads as follows:

1. All of the following when for use by manufacturers or producers directly in the manufacture or production of goods:

(a) dies, jigs, fixtures and moulds;

(b) patterns for dies, jigs, fixtures and moulds; and

(c) tools for use in or attachment to production machinery that are for working materials by turning, milling, grinding, polishing, drilling, punching, boring, shaping, shearing, pressing or planing.

and as a result of this it is now common ground that the matrices in question are exempt from excise tax since July 11, 1966.

The Agreed Statement of Facts sets out that during the period in question defendant was engaged in the process of making rubber stamps which were subject to the tax imposed by Section 30 of the Excise Tax Act and the defendant paid tax on these stamps. As part of the process of making them defendant made the matrices and the issue between the parties is whether defendant is liable to pay the tax imposed by Section 30 in respect of the said matrices by virtue of the operation of Section 31 of the Act.

The process used by the defendant to make the rubber stamps is described as follows:

(a) The defendant makes lead slugs from molten lead which slugs are fashioned into letters or other characters intended to be exhibited by the finished stamps. The lead slugs when complete are locked up together in a chase.

(b) A bakelite board is then placed over the chase and by means of pressure the defendant causes the board to be indented with the characters of the lead slugs. The bakelite mould thus produced is referred to as a matrix.

(c) The matrix is then applied to a sheet of uncured rubber and by means of heat and pressure the rubber is forced into the indentations in the matrix and cured.

(d) After the rubber sheet has been given the impression from the matrix and cured it is cut into individual stamps each of which is mounted on a wooden handle and sold in that form.

(e) When the stamps have been completed by the defendant the lead slugs are remelted for subsequent use. The matrices are not suitable for further use and are therefore discarded.

The Agreed Statement of Facts also sets out that on September 19, 1966 defendant applied to the Tariff Board pursuant to Section 57 of the Excise Tax Act for a declaration that the matrices in question were exempt from tax under the Act, which application was dismissed by declaration dated October 5, 1966. This declaration was appealed to the Exchequer Court pursuant to Section 58 of the Act and by a judgment of Jackett, P. dated December 2, 1966 the appeal was dismissed.* [2] No appeal was taken from this judgment.

Plaintiff in its reply to the Statement of Defence raises the question that defendant may not raise the issue that the matrices in question are exempt under the provisions of Section 32 of the Act by virtue of their being mentioned in Schedule III to the Act as this is res judicata.

The first argument raised by defendant is that matrices in question were not manufactured or produced ‘‘for use’’ of the defendant within the meaning of Section 31(1) (d) of the Excise Tax Act. This section deals with the tax when articles are not manufactured or produced and sold by the manufacturer or producer, but are used by himself and hence it is difficult to determine the value for purposes of the tax, which is nevertheless imposed on a value determined by the Minister, such use being regarded as a sale. The question of the interpretation of the words ‘‘use by the manufacturer or producer’’ contained in this section and in its predecessor Section 87(d) of the Special War Revenue Actt [3] which used the identical wording has been dealt with in a number of cases. The case of The King v. Henry K. Wampole and Co. Ltd., [1931] 8.C.R. 494, dealt with the tax on special small packages of the Wampole products which were put up for free distribution amongst physicians and druggists as samples. This case held, reversing the judgment of the Exchequer Court on this point, that the ‘* ‘use’ by the manufacurer or producer of goods not sold includes any use whatever that such manufacturer or producer may make of such goods, and is wide enough to cover their ‘use’ for advertising purposes by the distribution of them as free samples, . . .”. The appeal was dismissed however on another point, the question of double taxation, which will be dealt with later. The same year the Supreme Court in the case of The King v. Fraser Companies Ltd., [1931] S.C.R. 490, reversing an Exchequer Court judgment, held that the real intention was to levy the tax on the sale price of all goods produced or manufactured in Canada whether the goods so produced should be sold by the manufacturer or consumed by himself for his own purposes. In this case respondent was a manufacturer of lumber for sale but consumed a portion of it in constructing and building operations which it also carried out, this lumber being taken from the stock in its yards and not produced or manufactured especially for the purpose for which it was used.

In the case of The King v. Domimon Bridge Co. Ltd., [1940] S.C.R. 487; [1940-41] C.T.C. 99, which dealt with tax on the structural steel used by the defendant in the construction of bridges, the reasoning in the Fraser case was followed, and the use of the members of the superstructure for the purpose of fulfilling the contract to construct the bridge was held to be taxable.

A similar finding was made in the case of The Queen v. Dante Albert Saracini and Albert Saracini, [1959] Ex.C.R. 63; [1958] C.T.C. 355, in which the defendants, being builders of houses, produced or manufactured kitchen cabinets for the purpose of installing them in the houses being constructed by them, which houses were later sold. The cabinets were constructed in a warehouse apart from and some distance from the site of the house construction but were made according to the precise specifications and measurements required by each house and were not manufactured for sale to other buyers. After reviewing the previous jurisprudence Cameron, J. found the facts in this case almost identical with those of the Dominion Bridge case. In an earlier case of Bank of Nova Scotia v. The King, [1930] S.C.R. 174, where the defendant bank had, without any object of gain but for convenience, a printing plant with which it printed and made up ledgers, forms and other printed material required by it for carrying on its business, it was held, confirming the judgment of the Exchequer Court, that the bank was a manufacturer or producer and liable for consumption or sales tax on these materials. This judgment emphasized that it was not necessary that the goods in question be manufactured or produced for sale, as this would involve the exclusion from consideration of section 87(d) of the Special War Revenue Act (Section 31(1) (d) of the Excise Tax Act).

These cases all differ somewhat from the present one in that in the Fraser Companies, Dominion Bridge, and Saracini cases the goods used were incorporated in the final product, in the Bank. of Nova Scotia case (supra) the goods were not incorporated in a final product but were used by the bank itself in its business, and in the Wampole case (supra) the samples, while distributed to doctors and druggists in order to promote the company’s business and not sold, nevertheless: found their way into the hands of third persons in an unaltered form. In the present case while the matrices could theoretically have been used again according to the evidence of David Saltzman, the secretary of the defendant, at the hearing, it was impractical to do so, and it is admitted in the Agreed Statement of Facts they are discarded and hence are destroyed in the process of manufacturing the final product so they do not form part thereof. Despite these differences, however, I find, in the light of this jurisprudence, that the matrices were ‘‘for use by the manufacturer or producer and not for sale’’ within the meaning of Section 31(1) (d) of the Excise Tax Act and would be taxable as such unless they can be brought within the exception of Section 32(1).

The second argument raised by defendant was that the matrices are not “goods” within the meaning of Section 30 of the Act. In support of this defendant’s counsel argued that the word “goods” as used in the Act implies a commercial connotation of something marketable and that in this sense the matrices are not ‘‘goods’’. In rendering judgment in the Sara- cini case Cameron, J. stated (at page 65 [356] ) :

For some years prior to the period in question, the defendants in constructing their houses were accustomed to having their own carpenters (or the firms to which they had sublet the carpentry work) build the kitchen cabinets piece by piece in the proper place in the kitchen of the house under construction, where it remained permanently. Constructed in situ, and in that fashion, the cabinet was built as part of the individual house and admittedly never was “goods” as that word is used in the Excise Tax Act.

He dealt then with the distinction arising from the fact that the cabinets were subsequently built outside, in a warehouse, though to the specific measurements of the house in which they were to be installed and were never sold as cabinets to third parties. He went on to say at page 67 [358] :

Now in order to attract this tax it is clear that the goods need not be sold. If they are “goods” and consumed or used by the manufacturer they are liable to the tax, unless especially exempted.

Referring to the Dominion Bridge case which he found indistinguishable from that before him, he stated :

The decision in that case must have been based on a finding that the component parts of the bridge were in fact “goods” within the meaning of the Act.

The Supreme Court case of Quebec Hydro Electric Commission v. Deputy Minister of National Revenue,* [4] dealing with transformers used to convert electricity to voltage levels required by customers and whether such transformers were used directly in the manufacture or production of goods, stated that it was common ground that electricity falls within the meaning of the word ‘‘goods’’ in the relevant provisions of the Excise Tax Act and the appellant was therefore a manufacturer or producer of "goods” for the purposes of the said provisions. Moreover ‘‘matrices for use exclusively in the manufacture or production of printed matter’’ are specifically referred to in Schedule JII (supra), which indicates that they are considered as ""goods” within the meaning of Sections 30 and 31 of the Act, and the fact that it has been found that this exception did not cover the present matrices by the declaration of the Tariff Board and judgment of Jackett, P. (supra) does not affect this. In view of this, and of the wide interpretation given by the jurisprudence to the word ‘‘goods’’ as used in the Act, I cannot find that the meaning should be limited to articles which, whether not they are actually sold, can by themselves be considered objects of commerce. Even if this narrower interpretation were acceptable the witness Saltzman admitted that the matrices could be used 20 or 20 times before wearing out even though this is never done as it is cheaper to make new ones. In the context and in accordance with the intention of the Excise Tax Act therefore, I believe that matrices must be considered as ""goods” within the meaning of Section 30 of that Act.

Leaving aside for the moment the important third argument raised by defendant we can consider together the fourth and fifth arguments to the effect that the matrices are not subject to tax since they are used for the purpose of manufacturing a taxable article or goods, to wit, the rubber stamps, and that the imposition of the sales tax in connection with the manufacture or production of the matrices would therefore constitute double taxation, or alternatively would not be a consumption or sales tax within the meaning of the Excise Tax Act. The defendant argues that double taxation is repugnant to the law, which argument appellant counters by pointing out that there are many instances in the Excise Tax Act itself where double taxation clearly takes place, notably in the application of Section 31(1) (d) unless the articles can be brought within one of the exceptions of Section 32.

In support of his argument defendant relies strongly on the judgment of Anglin, C.J.C. in the Wampole case (supra), in which action it was stated that the cost of producing the samples was paid by the company as a necessary expense of business and treated in the company’s books as a necessary cost of production of articles manufactured and sold in respect of which last mentioned articles the company has paid sales tax. In rendering the majority judgment the learned Chief Justice states (at page 497) :

It is obvious to me that it cannot have been the intention of the Legislature to tax the same property twice in the hands of the manufacturer. Having regard to the admission of paragraph 4, above quoted, such double taxation would ensue were we to hold the samples here in question to be now subject to the consumption or sales tax, it being there admitted that the cost of producing such samples is included in the cost of production of articles manufactured and sold, in respect of which . . . the company has paid sales tax.

If the cost or value of these goods used as samples has already been a subject of the sales tax in this way, it would seem to involve double taxation if they should now be held liable for sales tax on their distribution as free samples.

He goes on to say :

If it was not intended . .. to make an admission that the sales tax had already been paid upon the cost of producing the samples for free distribution, that paragraph in the Special Case is wholly irrelevant and most misleading and I cannot understand the Crown assenting to its insertion unless it intended thereby to make the admission I have stated.

It appears to me that to apply this finding too widely would negate to a large extent the provisions of Section 31(1) (d) by virtue of which a sales tax is paid on goods used by a manufacturer in the process of manufacturing a final product on which sales tax will also be payable. Since the tax paid on the goods used in the manufacturing process will in most eases be taken into consideration by the manufacturer in his sale price of the final product there will be double taxation when the tax is paid on same. It would seem, therefore, that the Wampole case must be considered as a special situation based upon the specific admission by the appellant therein that the cost of producing the samples was treated as a necessary expense of the cost of production of the articles sold. While it would certainly be reasonable to presume in the present case that the cost of the matrices is taken into consideration by defendant in pricing the final product, the rubber stamps, on which the sales tax is paid, there is no specific admission to this effect in the Statement of Facts or evidence. There would also seem to be a further distinction which can be made between the present circumstances and the Wampole case, in that in the Wampole case it was the identical goods which would have been taxed twice while in the present case it would have been a different article which was taxed and then used in the course of production of the final product.

The question of what is meant by a consumption or sales tax is I believe well dealt with in Tariff Board Appeal No. 916,* [5] General Scrap and Car Shredder Limited v. Deputy Minister of National Revenue, Customs and Excise, where it was stated :

Turning now to the arguments of counsel for the appellant and dealing first with “context”, it seems to the Board that the concept of the consumption or sales tax embodied in the Excise Tax Act is that the tax should be collected only once on any goods as distinct from the concept of a “turnover” tax where, broadly speaking, a tax is collected each time the goods change hands. It is true there are some goods, the cost of which it is necessary to incur to manufacture or produce other goods which are subject to the consumption or sales tax and the goods they are used to manufacture or produce are also subject to the consumption or sales tax; such goods as the materials used in the construction of buildings, office equipment, and delivery trucks. However, dealing with the chain of transactions from the acquisition of machinery and equipment, the purchase of materials, including those materials which may be consumed or expended in the manufacture or production processes, right through to the sale of the finished goods, the concept of the consumption or sales tax is that the tax shall apply only to the final sale of the goods by a manufacturer or producer. There have been many amendments to the Excise Tax Act over the years exempting goods used in the manufacturingprocesses which serve to illustrate this concept of the manner in which the Act is intended to apply.

Obviously, for goods to be exempt from the Act, there must be a provision for their exemption but where two interpretations of provisions of the Act appear equally sound in other respects then it seems to the Board that that interpretation which avoids the pyramiding of the tax should be followed rather than one which would have the opposite effect.

Thus while conceding that the tax is intended to be a “consumption or sales tax’’, by virtue of the provisions of Sections 80 and 31 of the Act, and conceding that the Act recognizes in general that double taxation is repugnant, it nevertheless appears that this is accomplished by the use of the exemptions provided for in Section 32 of the Act and that Section 31(1) (d) does permit double taxation unless the goods in question can be brought within one of the exemptions of Section 32 and the Schedules referred to therein.

I now turn to defendant’s argument that the matrices are exempt under the heading ‘‘ Processing Materials” in Schedule III to the Act as ‘‘materials . . . consumed or expended directly in the process of the manufacture or production of goods’’ and before dealing with the merits of this contention it is first necessary to decide whether the claim for exemption under any section of Schedule III is res judicata as the result of the declaration of the Tariff Board and judgment of the Exchequer Court respecting these matrices previously referred to.

It is essential to the determination of this issue to examine very carefully the nature of the application to the Tariff Board for a ruling, the wording of its ruling, and the wording of the judgment of the Exchequer Court confirming this ruling in order to determine whether the claim for exemption under Schedule III has been previously adjudicated upon or not.

In his letter to the Tariff Board requesting a ruling dated March 16, 1966 (Exhibit P-5) defendant’s solicitor states as follows:

It is our client’s contention that the matrices are exempt in virtue of the 1963 amendment to the Excise Tax Act, wherein the following goods were enumerated as being exempt from tax:

“Typesetting and composition, metal plates, cylinders, matrices, file, art work, designs, photographs, rubber material, plastic material and paper material, when impressed with or displaying or carrying an image for reproduction by printing, made or imported by or sold to a manufacturer or producer for use exclusively in the manufacture or production of printed matter”.

The department has taken the position that these matrices are not being used for printing, while it is our contention that the definition of printing includes rubber stamping.

In the Crown’s brief to the Tariff Board (Exhibit P-6) it is stated under the heading ‘‘ Point in Issue’’: ‘‘The issue in this application is whether the matrices made by the applicant are articles mentioned in Schedule III of the Excise Tax Act under the heading ‘Printing and Educational’.” In the decision of the Tariff Board (Appendix 1 of Exhibit P-1, Agreed Statement of Facts) the first paragraph reads:

This is an application under the provisions of Section 57 of the Excise Tax Act for a declaration that matrices used in the production of rubber stamps are exempt from the consumption or sales tax by virtue of the 1963 amendment to Schedule III of the Excise Tax Act.

The next paragraph then states that the applicant contended the exemption should be made under he heading ‘‘Printing and Educational” and refers to the paragraph under that heading quoted above. It then describes the process of making rubber stamps and then states ‘It is the application of the sales tax under Section 31(1) (d) of the Excise Tax Act to the matrices which is the subject of this appeal”. The Board then discussed the argument that the matrices were used in the production of printed matter and in its concluding paragraph stated :

The Board declares that the rubber sheet is not “printed matter” within the meaning to be attached to these words in the exempting provision. The Board declares also that, in use, a rubber stamp does not produce “printed matter” within the meaning to be attached to these words in the exempting provision.

Accordingly, the application is dismissed.

In the judgment of the Exchequer Court Jackett, P. in his Reasons for Judgment starts out:

This is an appeal, under Section 58 of the Excise Tax Act, R.S.C. 1952, c. 100, as amended, from a declaration made by the Tariff Board on October 5, 1966, to the effect that an article, known as a matrix and used in the course of producing the rubber sheet portion of rubber stamps, did not fall within Schedule III to the Act as it was during a period of approximately three years prior to the amendments thereto effected by chapter 40 of the Statutes of 1966, so as to bring the sales of such articles, during that period, within the exempting provision of Section 32 and thus to exempt such sales from the consumption or sales tax imposed by Section 30 of the Act.

He refers to the order of the Court made on November 22, 1966, granting leave to appeal on the following question of law: ‘‘ Did the Tariff Board err as a matter of law in determining that matrices used in the production of rubber stamps are not made for use exclusively in the manufacture or production of printed matter?” He then reviews the arguments presented before him and concludes that the matrices used in this process are not being used in the manufacture or production of printed matter. He then states :

In conclusion I wish to mention, so as to avoid any misunderstanding as to what is being decided at this time, that the only question raised by this appeal is the applicability of Schedule III to the matrices made and used in the course of making rubber stamps. The question as to whether sales tax is payable on the matrix made and used as part of the process of making a rubber stamp as well as on the rubber stamp itself, even though the matrix has no function except as one of the stages in manufacturing the rubber stamp and even though the matrix does not exist as an independent article of commerce, is a separate question that has not been raised by this appeal.

The law relating to res judicata is so well known that it is not necessary to review it at length here. It has been well expressed in a judgment of the Supreme Court in he case of Bertha Maynard and Cecil Maynard v. Ruth Lillian Martin, [1951] S.C.R. 346 at 358, where Cartwright, J., now Chief Justice, states:

The following passage from the judgment of Maugham, J., as he then was, in Green v. Weatherill ([1929] 2 Ch. 213 at 221, 222), seems to me to state concisely the principles which are applicable:

“the plea of res judicata is not a technical doctrine, but a fundamental doctrine based on the view that there must be an end to litigation: see In re May (28 Ch.D. 516, 518); Badar Bee v. Habib Merican Noordin ([1909] A.C. 615). In the latter case it may be observed that Lord Macnaghten in delivering the judgment cites from the Digest and relies on the maxim “Except™ rei judicatae obstat quotiens eadem quaestio inter easdem personas revocatur’’. In the leading case of Henderson v. Henderson (3 Hare, 100, 114), there is to be found the following statement of the law by Wigram, V.C.: “I believe I state the rule of the Court correctly when I say that where a given matter becomes the subject of litigation in and of adjudication by a court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward only because they have from negligence, inadvertence or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation and which the parties, exercising reasonable diligence, might have brought forward at the time”. This passage has recently been approved by the Privy Council in the case of Hoystead v. Commissioner of Taxation ([1926] A.C. 155 170).”

In the judgment of the Judicial Committee in Hoystead v. Commissioner of Taxation (supra), at page 165 is the following:

“Parties are not permitted to begin fresh litigations because of new views they may entertain of the law of the case, or new versions which they present as to what should he a proper apprehension by the Court of the legal result either of the construction of the documents or the weight of certain circumstances.

If this were permitted litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted, and there is abundant authority reiterating that principle.”

Another expression of this principle is found in the Supreme Court case of Herbert Millar Ellard v. Dame Ellen Millar, [1930] S.C.R. 319, where the headnote reads in part as follows:

As a rule, under Quebec law, the authority of res judicata applies only to the dispositif or, in the language of the code (art. 124 1 C.C.), “to that which has been the object of the judgment’; but it will also result from the implied decision which is the necessary consequence of the express dispositif in the judgment. In this case, upon an action previously brought, a final judgment between the same parties had annulled two deeds for the reason that the annuity thereby provided should have been $2,000, instead of $800. Although the dispositif of the judgment stated that the action was maintained “so far as the annulment of the deeds was prayed for”, that involved a determination of the true amount of the annuity as being $2,000, which was the same question as that sought to be controverted in the present case; and such question was concluded as between the parties by the judgment in the first case.

In the case of The Queen v. Mead Johnson of Canada Limited, 11966] S.C.R. 457; [1966] C.T.C. 201, the Court held, reversing the judgment of the Exchequer Court, that the Tariff Board having decided that Metrecal in powdered form was subject to sales tax as being a pharmaceutical, and leave to appeal from that decision having been refused by the Exchequer Court, the Court could not now review this decision.

In the light of the foregoing jurisprudence it appears that if the defendant had merely applied to the Tariff Board for a ruling that the matrices in question were exempt from taxation under Section 32 of the Act because they were included in Schedule III, and had then merely raised one of the two possible claims for exemption under this Schedule, namely, that they were exempt because they were used exclusively in the manufacture or production of printed matter, and had neglected to raise the issue of the other possible claim for exemption, namely, that they were materials consumed or expended directly in the process of manufacture or production of goods, and the decision of the Board and subsequently of the Court had been to the effect that these matrices were not exempt under Schedule III, there would have been a clear case of res judicata, and the fact that defendant had neglected to raise the second argument at the time of the hearing before the Tariff Board would not have justified it in now raising it before the Court in the present proceedings in which it is called upon to pay the tax due on these matrices. I believe, however, that a close examination of its application to the Tariff Board makes it clear that what defendant asked for was a ruling that the matrices were used in the manufacture or production of printed matter and that it was on this question only that the Board made its ruling. As a consequence of the ruling they did not qualify under Schedule III for exemption on this ground. The final paragraph of the decision of the Tariff Board indicates that all that was really decided by it was that ‘‘the Board declares that the rubber sheet is not printed matter within the meaning to be attached to these words in he exempting provision. The Board declares that, in use, a rubber stamp does not produce printed matter within the meaning to be attached to these words in the exempting provision’’. It is clear from the wording of the order of the Exchequer Court granting leave to appeal, previously quoted, that this was the only issue which was before Jackett, P. on the appeal before him. It appears from the careful wording of the judgment in that case that this was the only issue on which the Court expressed its opinion.

It would appear therefore that the findings in both the Mead Johnson ease (supra) and the Ellard v. Millar case (supra) can be distinguished. In the latter case although the judgment merely maintained the action in so far as the annulment of the deeds was prayed for there was a clear implication that there had been a determination that the true amount of the annuity was $2,000 although the judgment did not say so, and this matter could therefore not be litigated again. There is certainly no implication in the decision of the Tariff Board or of the Exchequer Court in the present case that the question of the claim for exemption on the grounds that the matrices are materials consumed or expended directly in the process of manufacture or production of goods was ever argued or considered. I believe it would be an unduly strict interpretation of the law relating to res judicata to hold that because defendant applied to the Tariff Board for a ruling on an exemption from duty under Schedule III on one ground when he might at the same time have applied on two grounds he has now lost the right to have the second ground considered, despite the fact that it was never dealt with before either by the Tariff Board or by the Court. We are not dealing merely with an additional argument which was not raised in support of the initial claim before the Tariff Board for a ruling granting exemption, but with a new claim for exemption under a different subheading of Schedule III.

In view of this finding it now remains to consider whether matrices are ‘‘materials consumed or expended directly in the process of manufacture or production of goods’’ so as the bring them within the heading ‘‘ Processing Materials’’ in Schedule III as it existed between October 1, 1963 and July 11, 1966. In Tariff Board Appeal No. 750 Armalite Co. Ltd. et al. v. Deputy Minister of National Revenue for Customs and Excise,* [6] exemption

was claimed for anode bags, buffs, rotary bristle brushes and rotary wire brushes used in the metal finishing industry all of which are discarded after a short period of use. It was agreed by both parties that the goods under appeal ‘‘were consumed or expended directly in the process of manufacture or production of goods’’, so the only issue before the Board was whether they fell within the meaning of the word ‘‘materials’’. The Board held that the word ‘‘materials’’ as used in Schedule III does not cover manufactured articles but refers to matter or substances considered as such, for example, metal, cloth, powders, pastes, etc.

In the case of Delta Glucose Refinery Limited v. Deputy Minister of National Revenue for Customs and Excise, Tariff

Board Appeal No. 173,* [7] it was held that activated carbon used in the manufacture of glucose lost in time its usefulness as a clarifying agent, but that it has not been consumed in that it is commercially feasible to reactivate it, and referred with approval to an earlier ruling in Appeal No. 100 which had stated that: ""Many things are made useless for further performance in that particular operation, but if they are not consumed, eaten up, gone, not there, they are not consumed within the meaning of the Act . . . (There) has to be sensible and substantial disappearance instead of mere uselessness for further operation.’ ’

The case of Rio Tinto Mining Company of Canada Limited and Consolidated Denison Mines Limited v. The Deputy Minister of National Revenue for Customs and Excise] [8] dealt with a claim for exemption from sales tax of rock bolts used in mining operations for the purpose of supporting disturbed or loose rock, thereby preventing the loose rock from falling into the mine aperture from the ceiling or walls. One of the claims for exemption was that the goods were consumed or expended directly in the process of the manufacture or production of goods. The Board held that ‘‘while it was true that the rock bolts were ‘expended’ in the sense that they could be used only once, such expenditure was not ‘directly in the process of manufacture or production of goods’ but was for a purpose ancillary to the mining operation. The rock bolts were not "consumed’ within the meaning of that word as used in Schedule III, which requires substantial disappearance instead of mere uselessness for further operations.’’ In the appeal of this ruling to the Exchequer Court the appeal was based solely on the claim for exemption on another ground, namely, that the rock bolts constituted safety devices and equipment for the prevention of accidents in the manufacturing or production of goods, the appeal on the grounds that they constituted materials consumed or expended directly in the process of manufacture or production of goods being abandoned, so unfortunately this question was not dealt with further, either in the Exchequer Court or in the Supreme Court, in this case.

The finding of the Board in the Delta Glucose case (supra) can perhaps be distinguished in that the carbon could be reactivated and used again and hence was properly held not to have been “consumed”. On the other hand in the Armalite case (supra) it was agreed by both parties that the anode bags, buffs, rotary bristle brushes and rotary wire brushes were in fact ‘‘consumed or expended directly in the process of manufacture or production of goods’’. This seems to bear a closer resemblance to the matrices in the present case, although the agreement of the Minister to this seems perhaps to be somewhat contrary to the ruling in case No. 100 referred to in the Delta Glucose case (supra) to the effect that even if goods are rendered useless for further performance in the particular operation they are not consumed unless they have been eaten up or gone entirely so as to constitute a substantial disappearance instead of a mere uselessness for further operation. In any event although there is no similar agreement in the present case that the goods were ‘‘consumed or expended directly in the process of manufacture or production of goods’’ it was admitted in the Agreed Statement of Facts that the matrices are not suitable for further use and are therefore discarded. The Delta Glucose case was interpreting the words ‘ ‘ consumable materials ’ as they appeared in Schedule III to the Act at that time, but the words used in Schedule III in the period under consideration in the present case are ‘‘consumed or expended’’ which I consider to be broad enough to include the matrices which are discarded after one use.

The finding of the Tariff Board in the Armalite case (supra), however, is that the word ‘‘materials’’ as used in Schedule III under the heading ‘* Processing Materials’’ must mean something such as metal, cloth, powders, pastes, etc. and not things constructed from such materials into articles of specific design, size and shape. The decision points out that the Act uses the words “articles and materials’’ in several places, and the word “materials” only in others. Examining the Act, I find under the heading ‘‘Goods Enumerated in Customs Tariff Items’’ in Schedule III the words ‘‘Article and materials to be used exclusively in the manufacture of goods enumerated as customs tariff items . . .”. Under the heading ‘‘Municipalities’’ in Schedule III the words used are ‘‘ Articles and materials to be used exclusively in the manufacture of the foregoing’’, whereas in the clause we are now considering the word ‘‘materials’’ is used alone, and it is also used alone under the heading “Goods Enumerated in Customs Tariff Items’’ where one paragraph reads “Materials, not including plant equipment consumed in process of manufacture or production, that enter directly into the cost of the goods enumerated in Customs Tariff . . .’’.

The claim for exemption we are now considering appears under the heading ‘‘Processing Materials” and we must give some significance to this.

However we must not lose sight of the fact that it is significant that the words ‘‘articles and materials’’ are used in some sections of Schedule III and the word ‘‘materials’’ alone in other sections and it 1 a reasonable assumption that this was done deliberately. If a distinction. must be made therefore between the word ‘‘articles’’ and the word ‘‘materials’’ it would appear that the matrices in question should be considered as ‘‘articles’’ rather than ‘‘materials’’. The bakelite board on which the characters are imprinted from the lead slugs would be a ‘‘ material” as would the lead from which the slugs are made, but once imprinted it becomes a matrix which would appear to be an “article” rather than a ‘‘material’’. The fact that the matrices are subsequently ‘‘ ‘ consui^d or expended in the process of manufacture” of the rubber stamps as I have found does not alter the fact that before they are so consumed or expended they constitute ‘‘articles’’ rather than ‘‘materials’’. An exception to a taxing statute must be strictly interpreted, and I find myself in agreement with the distinction made by the Tariff Board in the Armalite case.

Judgment will therefore be rendered in favour of plaintiff for $5,324.11 together with the penalties prescribed by Section 48(4) of the Excise Tax Act accrued to date of payment of the tax payable, and costs of this action, to be taxed.